Will the abolition of the Social Fund, the source of emergency crisis support for most vulnerable families, push more people into the arms of loan sharks?

The short answer is, we don't know yet for sure, though comprehensive new research from The Children's Society suggests key elements are in place to ensure this is precisely what will happen.

As I've reported before, the replacement of the social fund with 150 local authority-led "local welfare asssistance" schemes in April marks a huge shift in emphasis from entitlement to cash welfare (in the form of crisis loans and grants) to discretionary "in-kind" support, in the form of food stamps, food bank referrals and charity clothes and furniture.

There were two elements to the social fund: crisis loans, which were typically small £50 loans repayable against future benefit payments; and the community grant, which offered emergency grants of around £1,000 to vulnerable people to buy beds, cookers and other essentials.

These cash-based supports have now largely disappeared under local welfare. The Children's Society survey found that 62% of English councils were no longer providing interest free cash loans. In addition, two-thirds state that no cash assistance is available, and 15% say cash help (in the form of grants) will only be offered in exceptional circumstances.

A huge irony, given the Government's professed desire to target social security support on "hard working families" is that in many cases low income households, who may have previously accessed crisis loans (perhaps because of delays in being paid by their employer) will be now unable to access support.

According to the Children's Society, 25% of local authority welfare schemes now exclude families where an adult is in work. The society's policy advisor, Dr Sam Royston, explained:

Working families are really pummelled by this. And they are the ones most likely to be going to high interest lenders

Mr G is a 43 year old married Jobseeker, and he has an 18 month old son. He applied for a crisis loan of £50 to help him buy food and pay for fuel for 4 days. He had received his usual fortnightly Jobseeker's Allowance but 4 days before his next payment of benefit was due his son had become unwell suddenly and had to go into hospital. Mr G lives in a semi-rural area with no car and as there was no public transport, and the hospital was unwilling to provide hospital transport, Mr G had to pay for a taxi to and from the hospital. This spent the final £50 of his benefit, which the family would normally expect to have lasted them for food until the next benefit payday.

Under most new local welfare schemes, Mr G - who you might agree appears to have a very sound case for emergency social security support - will be now most likely reliant on charity. He may recieve a referral to a food bank, or food voucher, in lieu of his families nutritional needs. But in the absence of cash, there appears to be no facility to help him put petrol in the car to get him to the hospital. This again, perhaps, is where the loan shark steps in.

Here's another example, this time a real life one, which I wrote about last month. A homeless 62-year old woman, Dawn Martin, was refused help to find housing by Isle of Wight council. It passed her on to the local welfare assistance scheme. Although what she needed was a cash loan to put down as a deposit on a room, the council was unable to help. Instead it offered her a voucher with which she could buy:

A tent

The council subsequently relented after a local media outcry, and Martin now has somewhere to live. But the absurdity of offering a tent is enshrined in the policy, and again, the likelihood of vulnerable recipients becoming reliant on high cost credit lenders increases.

This example demonstrates a profound problem with cashless welfare: it is hugely inflexible. It makes it very difficult to meet the actual needs of those who require it, and it can be hugely stigmatising.

The Children's Society notes:

It is a concern that in many cases a system of cash loans for households in need have become hand-outs of food or second hand furniture. Whilst in some circumstances such "in-kind" support may be very helpful, this fundamentally changes the nature of the support offered, taking it from a means of accessing interest free loans and community grants, to something closer to charitable hand-outs.

The Children's Society reports that the majority of authorities will still offer support for rent in advance, but many won't. This creates a postcode lottery. But even if your council does provide rent advances you may not qualify, even if you are in poverty and acute crisis, if the council considers that you can borrow the money from family, friends or get a grant from a local hardship charity.

It is easy to blame councils for the absurdities of the system. To be fair to them, they had very little time to draw up local welfare schemes and received only a fraction of the money previously available for crisis help. The Children's Society points out that funding for emergency support has reduced by 46% since 2010. Local welfare is, we must remind ourselves, a Coalition vision.

Ministers appears to think the local welfare schemes are working well, three months in. The work and pensions minister Lord Freud recently declared that the schemes had "landed well," though he did not elucidate on what he meant by this, or the evidence for this assertion.

The society has drawn up a list of recomendations to improve the system. As it stands, the risk is that local welfare may increase debt, hardship, and relaince on loan sharks. The timing could not be worse. As Matthew Reed, the society's chief executive, says:

Families are at risk of becoming the casualties of government changes to the social fund. These could blight the lives of the most vulnerable and come at a time when other major reforms to the welfare system risk making families more reliant on emergency support.

• The Children's Society has produced an interactive map of England to enable you to find out what crisis welfare provision is provided in your area. You can see it here.